COMMERCIAL BANKING:

1. What is QIP? And what is the latest QIP you come across? Explain the QIP process?
QIP or Qualified Institutional Placement is largely a fund raising tool for the listed
companies.
QIP is a process which was introduced by SEBI so as to enable the listed companies to raise
finance through the issue of securities to qualified institutional buyers (QIBs).
Earlier, since raising finance in the domestic market involved a lot of complications, Indian
companies used to raise funds from the overseas markets. So to prevent this, SEBI
introduced this process so as to make the raising of funds easier in the domestic market.

2. What is PCA ?
To ensure that banks don't go bust, RBI has put in place some trigger points to assess,
monitor, control and take corrective actions on banks which are weak and troubled. The
process or mechanism under which such ac tions are taken is known as Prompt Corrective
Action, or PCA.
The 1980s and early 1990s were a period of great stress and turmoil for banks and financial
in stitutions all over the globe. In USA, more than 1,600 commercial and savings banks in
sured by the Federal Deposit Insurance Corporation (FDIC) were either closed or given
financial assis tance during this period. The cumulative losses incurred by the failed
institutions exceeded US $100 billion.

3. Discuss the highlights of Interim Union Budget 2019 and how it will impact the economy.
Union minister Piyush Goyal presented the election year Interim Budget in parliament today
and announced major relief for farmers and individual taxpayers. This was the last Interim
Budget of the NDA government led by Prime Minister Narendra Modi before the Lok Sabha
elections due by May. With the Lok Sabha election just months away, the government
kept the budget focussed on immediate relief such as easing income tax rules, favourable
loan terms for small businesses, farm loan waiver and even direct cash transfers to small
farmers. The government said it will send Rs. 6,000 to small farmers directly into their bank
accounts in a scheme that will be funded 100 per cent by the centre. The programme will
cost Rs. 75,000 crore. Piyush Goyal's turn to reveal the contents of the Union Budget
briefcase in the crucial national election year came after Finance Minister Arun Jaitley had
to go on leave and fly to the US for treatment. Yesterday, the government said its estimate of
Gross Domestic Product (GDP) growth for fiscal 2018 was 7.2 per cent, significantly higher
than 6.7 per cent earlier.
The interim Union Budget for 2019-20 was announced by Mr Piyush Goyal, Union Minister for
Finance, Corporate Affairs, Railways and Coal, Government of India, in Parliament on February
01, 2019. It focuses on supporting the needy farmers, economically less privileged, workers in
the unorganised sector and salaried employees, while continuing the Government of India’s push
towards better physical and social infrastructure.
Total expenditure for 2019-20 is budgeted at Rs 2,784,200 crore (US$ 391.53 billion), an
increase of 13.30 per cent from 2018-19 (revised estimates).
Highlights of Interim Union Budget 2019-20
 Overview of the economy
o India is currently the fastest growing major economy in world and the sixth
largest economy, compared to 11th largest in 2013-14.
o India will be a US$ 5 trillion economy in the next five years and might become a
US$ 10 trillion economy in the next eight years thereafter.
o Average inflation rate in the country has gone down drastically to 4.6 per cent in
the current government’s tenure, lower than inflation under any other past
government.
o Fiscal deficit of the Government of India is expected to be 3.4 per cent of the
GDP for 2019-20 and 2018-19 (revised estimates).
 Major Expenditure Items
o Capital expenditure for 2019-20 is expected to be Rs 336,292 crore (US$ 47.29
billion).
o Centrally sponsored schemes have been allocated Rs 327,679 crore (US$ 46.08
billion) in 2019-20.
o Defence budget will surpass Rs 300,000 crore (US$ 42.19 billion) for the first
time in 2019-20.
o Allocation for North-East areas is pegged at Rs 58,166 crore (US$ 8.18 billion) in
2019-20, an increase of 21 per cent over 2018-19 (budget estimates).
o Scheduled tribes have been allocated Rs 50,086 crore (US$ 7.04 billion) in 2019-
20, an increase of 28 per cent over 2018-19 (budget estimates).
 Poor and Backward Classes
o The government is working to reduce the rural-urban and class divide in the
country.
o Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has
been allocated Rs 60,000 crore (US$ 8.44 billion) for 2018-19.
o A new pension scheme named ‘Pradhan Mantri Shram-Yogi Mandhan’ will be
launched for workers in the unorganised sector, with an outlay of Rs 500 crore
(US$ 70.31 million) for 2019-20. This would provide them an assured monthly
income of Rs 3,000 (US$ 42.19) from 60 years of age.
o NITI Aayog will set up a committee to identify de-notified, nomadic and semi-
nomadic communities, which are not yet classified. A welfare development board
will also be set up for these communities’ empowerment.
 Support for Farmers
o A historic programme named ‘Pradhan Mantri Kisan Samman Nidhi (PM-
KISAN)’ is being launched to provide assured income support to the vulnerable
farmers in the country, effective from December 02, 2018. Under the scheme,
families with cultivable land of up to two hectares will be given direct income
support of Rs 6,000 (US$ 84.38) per year in three equal instalments. Annual
outlay for the programme is Rs 75,000 crore (US$ 10.55 billion). Around 120
million small and marginal farmer families will benefit from this programme.
o Rashtriya Kamdhenu Aayog will be set up to enhance cow resources.
 o A separate Department of Fisheries will be created.
o Farmers pursuing animal husbandry and fisheries activities, who avail credit
under the Kisan Credit Card scheme (KCC) will become eligible for 2 per cent
interest subvention and 3 per cent subvention on timely repayment.
 Infrastructure
o Railways will get capital support of Rs 64,587 crore (US$ 9.08 billion) in 2019-
20. Operating ratio of the railways is expected to improve to 95 per cent in 2019-
20.
o Container cargo movement will be introduced to North-East areas as well.
o Around 100,000 villages in the country will be made digital villages in the next
five years.
o A National Centre on Artificial Intelligence will be created on lines with the
Centres of Excellence.
o Pradhan Mantri Gram Sadak Yojana (PMGSY) has been allotted Rs 19,000 crore
(US$ 2.67 billion) in 2019-20.
 Micro, Small and Medium Enterprises (MSMEs) and Traders
o The Government e-Marketplace (GeM) is being extended to all Central Public
Sector Enterprises (CPSEs), providing more opportunities for MSMEs to sell their
products.
o Department of Industrial Policy and Promotion (DIPP) will be renamed as the
Department for Promotion of Industries and Internal Trade.
o Over 90 per cent of businesses paying goods and services tax (GST) will soon be
able to file quarterly returns.
 Tax Proposals
o Individual taxpayers with annual income up to Rs 500,000 (US$ 7,031.34) will
get full tax rebate and hence will not be required to pay any tax. As a result people
with gross income up to Rs 650,000 (US$ 9,140.74) may get full tax exemption
with specific investments. This is expected to provide tax benefit of around Rs
18,500 crore (US$ 2.60 billion) to around 30 million middle class taxpayers in the
country.
o Standard deduction for salaries persons is being increased from Rs 40,000 (US$
562.51) to Rs 50,000 (US$ 703.13).
o Income tax on notional rent for second self-occupied house will be exempted.
o Threshold for tax deducted at source (TDS) for interest on bank and post office
deposits is increased from Rs 10,000 (US$ 140.63) to Rs 40,000 (US$ 562.51).
o Benefit of rollover capital gains up to Rs 2 crore (US$ 0.28 million) will be
increased from investment in one residential house to two houses. This can be
availed once in a lifetime.
 Vision for the Next Decade
o To build physical and social infrastructure for a US$ 10 trillion economy.
o To create a Digital India that impacts life of all Indians.
o Make India pollution free thrive on electric vehicles and renewable energy.
 o Expand rural industrialisation using modern technology.
o To have clean rivers, safe drinking water and efficient use of water.
o Make our coastline and ocean waters power India’s growth.
o To send an Indian astronaut to space by 2022 and make India a lunch pad for
satellites of the world through our space programme – Gaganyaan.
o Make India self-sufficient in food export to meet the world’s needs.
o A distress free and healthcare and a functional and comprehensive wellness
system.
o Make India a minimum government and maximum governance nation.

Exchange Rate Used: INR 1 = US$ 0.0141 as on February 01, 2019

What are the priority lending sector for this budget?

The Reserve Bank’s decision to hike priority sector lending (PSL) slabs will allow first-time
home buyers avail higher loans at better terms, which in turn will prop up sales in the affordable
housing segment, real estate experts said.

RBI has revised the housing loan limit for PSL to Rs. 35 lakh from Rs. 28 lakh in metros with a
population of 10 lakh and above and to Rs. 25 lakh from Rs. 20 lakh in other centres, provided
the overall cost of the dwelling unit in the metros.

Categories under priority sector

Agriculture 18%: Within the 18 percent target for agriculture, a target of 8 percent of ANBC is
prescribed for Small and Marginal Farmers.

Micro, Small and Medium Enterprises 7.5 percent.

Export Credit: Incremental export credit up to 2 percent for domestic banks and foreign banks
with 20 branches and above.

Education: Loans to individuals for educational purposes including vocational courses upto Rs
10 lakh.

Housing: Loans to individuals up to Rs 28 lakh in metropolitan centres (with population of ten

lakh and above) and loans up to Rs 20 lakh in other centres for purchase/construction of a
dwelling unit per family.

Social Infrastructure: Bank loans up to a limit of Rs 5 crore per borrower for building social
infrastructure for activities namely schools, health care facilities, drinking water facilities and
sanitation facilities in Tier II to Tier VI centres.
Renewable Energy: Bank loans up to a limit of Rs 15 crore to borrowers (individual households-
Rs 10 lakh) including for public utilities viz. street lighting systems, and remote village
electrification.

Others: SHG, JLG etc.